What type of property is assessed using the cost approach?

The cost approach is particularly suitable for unique or specialized properties that rarely sell because it focuses on calculating the value based on the cost of constructing a similar property, minus depreciation. This approach is especially effective for assets that do not have a comparable market due to their distinct characteristics or uses, making it difficult to determine value through traditional sales comparison methods.

Properties in a rapidly changing market typically require a different assessment approach, as fluctuating market conditions can significantly affect property values. Residential rental properties are often evaluated using market-based methods that analyze rental income, while commercial office buildings, although they can sometimes be assessed using the cost approach, often rely more on the income approach due to their income-generating potential. Therefore, the cost approach is best suited for properties that are unique or specialized, where comparable sales data is not readily available.